To Our Clients, Colleagues and Friends:   

· On this day in history, March 5, 1770, British soldiers fired on a mob of Boston colonists and killed six of them.  The Boston Massacre became a rallying cry and lead, eventually, to our War of Independence. And this was 138 years ago today.

• Washington Mutual just issued an 8-K stating that in 2008, cash bonuses will be determined by, among other items, operating profits excluding loan losses and REO expense. We hope we mis-read this, but if not, this is as outrageous as anything a Board of Directors can come up with. How do you exclude loan losses, when making loans is your core business?  What an insult to every shareholder who lost money when the stock cratered due to loan losses.
• Those losses reported last week by Fannie Mae and Freddie Mac are disturbing.  They didn’t buy sub-prime loans, and while much of the losses were due to loans defaulting, a fair amount was also accounting losses.  Sometimes when we can’t sleep, we wonder if accounting treatments have gone too far.
• On accounting, let’s be really simple:  If you’re supposed to regularly mark-to-market your assets, why can’t you also mark-to-market your liabilities?  As an example, rates go up and the value of your mortgages go down. We get that. But as rates go up, doesn’t that increase the value of your low-rate deposits?  Can’t your low-rate deposits be marked-to-market at something over par?  It seems to us that the insurance companies are also hurt. They have long-term liabilities (contracts to pay out money upon a person’s death), so they obviously must match these with long term assets. If properly matched, what’s the benefit of marking the assets to market?  We’re only asking!
• We probably have less than ten clients who do commercial loans, but we still fin